Chegg, Inc.

Greetings and welcome to the second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tracy Ford, Vice President of Investor Relations at ESG.

Good afternoon. Thank you for joining Chegg's second quarter 2023 conference call. On today's call are Dan Rosenzweig, co-chairperson and CEO, and Andy Brown, chief financial officer. A copy of our earnings press release, along with our investor presentation, is available on our investor relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our Media Center website at chegg.com slash Media Center. We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chang's annual report on Form 10-K filed with the Securities and Exchange Commission on February 21, 2023, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release on the investor slide deck found on our IR website, investor.cheg.com. We also recommend you review the investor data sheet, which is also posted on our IR website. Now, I will turn the call over to Dan.

Thank you, Tracy, and welcome everyone to our 2023 Q2 earnings call. Our team executed well, outperforming guidance for both revenue and adjusted EBITDA. As the second quarter progressed, we saw year-over-year trends for customer acquisition and retention rates improve, which drove the upside in our results. We are entering an exciting new chapter for Chegg, catalyzed by the advances in artificial intelligence. To take advantage of these new opportunities, Chegg is rapidly pivoted because we believe that category-defining companies with strong brand loyalty, sought-after services, and highly valuable data sets can leverage AI to grow and will create outsized returns. It is still early, and since we last reported, we've gained greater insights into students' use and perceptions of AI and how it relates to Chegg. Our recent survey shows students see ChatGPT and Chegg as complementary with very different use cases. The latest Y-poll survey states that while Gen Z students are using AI to improve their education, they are not comfortable with the exact information ChatGPT puts out. And it's become clear to us that a simple, high-quality, accurate personal learning assistant is needed, and we feel we are uniquely positioned to deliver a world-class personal learning assistant. We are moving fast and launched a beta version of our initial generative experience in May. Feedback has been very positive, specifically our students like our simple user interface, which is conversational, and they have always trusted the quality, accuracy, and relevance of our proprietary step-by-step solutions. Our research also shows that 86% of students say that they prefer study help that is reviewed by human subject matter experts, and 85% say they want it to be personalized to their individual learning needs. So it is no surprise that engagement from our beta testers is extremely high. And they are interacting more with each question and are staying for significantly longer sessions. We appreciate that speed and execution are critical to our success. Our partnership with Scale AI announced today will allow us to accelerate our ability to deliver the new Chegg experience starting in the fall and rolling out over the course of the next two semesters. The new Chegg will combine the best of generative AI with Chegg's proprietary, high-quality solutions and demonstrated ability to improve student outcomes. They can expect to see a much simpler conversational user interface, personalized learning pathways, more in-depth content, and the ability to transform it automatically into innovative study tools, such as practice tests, study guides, and flashcards. In order to further enhance our competitive mode and lower our costs, we are building our own large language models, which gives us the ability to train them specifically for education. Our LLMs will be trained with our unique data sets, and with the help of our 150,000 subject matter experts, we expect to deliver a significantly enhanced and differentiated learning experience for students compared to the generic models that are available today. And this is just the beginning. I want to give you a sense of how big we believe this TAM expanding opportunity can be and how we plan to capture it. We intend to build the largest connected community of learners around the world with a truly scalable, affordable, adaptive learning assistant by combining the tools, pathways, and the accuracy that students depend on. Chegg's prove-it learning taxonomy, along with our deep history of data from schools, classes, and professors sets us apart. We have said for years that students' challenges go way beyond the academic need. And now, by leveraging advancements in artificial intelligence, we believe we can make a significant impact on reducing the nearly 40% of students who drop out of the higher education system and the more than 50% that never enter. Increasingly, students are connecting their academic journey with their skills-based needs in order to be employable in today's economy. SAG is developing integrated skills pathways that will help students assess their current proficiency, identify their gaps, and then help them acquire those skills. We are in a great position to do this by leveraging our skills offerings, where we continue to see excellent growth. We also appreciate that students today face a wide variety of personal challenges that can get in the way of graduating on time or at all. We know that if we can connect students to solutions that address some of these issues, such as mental health, food insecurity, and financial barriers, we can improve their chances of finishing their education and thriving. We have created a concept video for you which illustrates how this may all come together, which you can review within our investor deck posted on our IR website. More than 50% of the world's population is below the age of 30, and they have increasingly turned online to advance themselves academically and professionally. Now, aided further by the proliferation of AI, the opportunity for tech to serve them is bigger than ever. And with that, I will turn it over to Andy. Andy?